How to Finance Your First Exotic Car

[Craigy]

Just saw this very good, very comprehensive, succinct ~10m video on high-end car financing.  Not sure many on here will need this info, but it seems to be a topic of interest.   

https://www.youtube.com/watch?v=9wDpAqCTjrU

**TRIGGER WARNING** - financing of automobiles is discussed therein, not for the faint of heart.  :lol:

But for seriouslies I think some of y'all will find it interesting.

[VagabondMD]

Don’t!

[ENT Doc]

Craigy wrote:

Just saw this very good, very comprehensive, succinct ~10m video on high-end car financing.  Not sure many on here will need this info, but it seems to be a topic of interest.   

https://www.youtube.com/watch?v=9wDpAqCTjrU

**TRIGGER WARNING** – financing of automobiles is discussed therein, not for the faint of heart.  

But for seriouslies I think some of y’all will find it interesting.

Click to expand...

C'mon man, you gotta put that trigger warning in the topic title.  My snowflake ****************** nearly had a heart attack.  ;-)

[G]

I love it.  I particularly like the method of working your way up to an expensive car loan by getting 3-4 (progressively more expensive) cars per year.

It would be super fun to know the financial data about someone who finances an exotic car over 12 years.

[Craigy]

G wrote:

I love it.  I particularly like the method of working your way up to an expensive car loan by getting 3-4 (progressively more expensive) cars per year.

It would be super fun to know the financial data about someone who finances an exotic car over 12 years.

Click to expand...

The person who finances a car over 10 or 12 years never makes the last payment.  Instead, the car gets traded in every 12-24 months on another car, a new loan is issued, rinse and repeat.

The monthly payment isn't really paying down principal, or paying for the car, but is more of a general cost to finance the vehicle.  Any principal paid down is usually eaten up by depreciation at trade-in.

Essentially the user is paying, e.g., $2,000 a month in order to own and enjoy a ~$200,000 car, without ever having to write the $200,000 check.

There's definitely a big mix of borrowers here, people who have the money but simply don't want to commit to a large cash outlay vs people who probably shouldn't be borrowing the money in the first place.

[DMFA]

Craigy wrote:

G wrote:

I love it.  I particularly like the method of working your way up to an expensive car loan by getting 3-4 (progressively more expensive) cars per year.

It would be super fun to know the financial data about someone who finances an exotic car over 12 years.

Click to expand…

The person who finances a car over 10 or 12 years never makes the last payment.  Instead, the car gets traded in every 12-24 months on another car, a new loan is issued, rinse and repeat.

The monthly payment isn’t really paying down principal, or paying for the car, but is more of a general cost to finance the vehicle.  Any principal paid down is usually eaten up by depreciation at trade-in.

Essentially the user is paying, e.g., $2,000 a month in order to own and enjoy a ~$200,000 car, without ever having to write the $200,000 check.

There’s definitely a big mix of borrowers here, people who have the money but simply don’t want to commit to a large cash outlay vs people who probably shouldn’t be borrowing the money in the first place.

Click to expand...

Still on the hook for maintenance and everything, etc, right?  It's almost like leasing in that regard, except leasing would at least cover a large amount of the maintenance bill, right?

It's like people financing houses they're not going to live in for 15-30 years.  Now, you've got to live somewhere, and you absolutely don't *need* an expensive car (or, if you're a disciple of MMM, any car at all).  Obv I'd never do it or recommend anyone ever do it, but it's an interesting concept.

...with my new moderator powers, maybe I should edit *TRIGGER WARNING* into the thread title...? lol

[Craigy]

DMFA wrote:

Craigy wrote:

G wrote:

I love it.  I particularly like the method of working your way up to an expensive car loan by getting 3-4 (progressively more expensive) cars per year.

It would be super fun to know the financial data about someone who finances an exotic car over 12 years.

Click to expand…

The person who finances a car over 10 or 12 years never makes the last payment.  Instead, the car gets traded in every 12-24 months on another car, a new loan is issued, rinse and repeat.

The monthly payment isn’t really paying down principal, or paying for the car, but is more of a general cost to finance the vehicle.  Any principal paid down is usually eaten up by depreciation at trade-in.

Essentially the user is paying, e.g., $2,000 a month in order to own and enjoy a ~$200,000 car, without ever having to write the $200,000 check.

There’s definitely a big mix of borrowers here, people who have the money but simply don’t want to commit to a large cash outlay vs people who probably shouldn’t be borrowing the money in the first place.

Click to expand…

Still on the hook for maintenance and everything, etc, right?  It’s almost like leasing in that regard, except leasing would at least cover a large amount of the maintenance bill, right?

It’s like people financing houses they’re not going to live in for 15-30 years.  Now, you’ve got to live somewhere, and you absolutely don’t *need* an expensive car (or, if you’re a disciple of MMM, any car at all).  Obv I’d never do it or recommend anyone ever do it, but it’s an interesting concept.

…with my new moderator powers, maybe I should edit *TRIGGER WARNING* into the thread title…? lol

Click to expand...

Yeah, maintenance, repairs & insurance.  A lease usually doesn't cover maintenance unless it's also part of one of those new car programs.  A lease on a used car will almost never cover maintenance.

On a new or newer car maintenance and repairs should be low/near-zero, as most cars are still under warranty, and newer cars don't require as much maintenance in general.  Some companies include maintenance too, e.g. Ferrari includes all scheduled maintenance free for the first 7 years.  Plus most owners don't put a lot of mileage on these sportscars to begin with.

On an old car you're taking a bigger gamble that you could have some large or even catastrophic repairs come up, which is one reason it's more difficult to finance them.  A guy stretching to pay $1,000 a month on his 2003 Gallardo will have a heart attack when the car suddenly needs a $30,000 transmission.

One of my favorite tidbits from the video was the concept of a "single-pay" lease where the buyer/lessee has such horrible credit that the only way to get the car is to make every lease payment up front.   :lol:

If you're well-to-do, spending a couple grand a month on your six-figure sportscar habit isn't that horrible of a hobby, all things considered, but for the people who are really stretching, it could be pretty disastrous.

[Coastalinvestor]

This post is a testament to why relatively few physicians have a high net worth.

[CM]

Coastalinvestor wrote:

This post is a testament to why relatively few physicians have a high net worth.

Click to expand...

Not sure why this opinion is common. This survey indicates that 65% of physicians between 50-64 yo are millionaires, and 73% are millionaires by 65 yo:

https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#5

[Craigy]

CM wrote:

Coastalinvestor wrote:

This post is a testament to why relatively few physicians have a high net worth.

Click to expand…

Not sure why this opinion is common. This survey indicates that 65% of physicians between 50-64 yo are millionaires, and 73% are millionaires by 65 yo:

https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#5

Click to expand...

That's a fair point, but arguably simply being a "millionaire" isn't particularly high net worth.  IMO most middle-class people getting into their 60s trying to retire should probably have something resembling $1M of net worth between their home and retirement savings.

If you look at https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#4 it looks like the vast majority of physicians have a net worth under $2M.

In my anecdotal experience, except for the old guys, and even among the old guys, most docs are high income, high spenders, relatively low net worth.  Or at least lacking a net worth that is commensurate with their income.

[CM]

Craigy wrote:

CM wrote:

Coastalinvestor wrote:

This post is a testament to why relatively few physicians have a high net worth.

Click to expand…

Not sure why this opinion is common. This survey indicates that 65% of physicians between 50-64 yo are millionaires, and 73% are millionaires by 65 yo:

https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#5

Click to expand…

That’s a fair point, but arguably simply being a “millionaire” isn’t particularly high net worth.  IMO most middle-class people getting into their 60s trying to retire should probably have something resembling $1M of net worth between their home and retirement savings.

If you look at https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#4 it looks like the vast majority of physicians have a net worth under $2M.

In my anecdotal experience, except for the old guys, and even among the old guys, most docs are high income, high spenders, relatively low net worth.  Or at least lacking a net worth that is commensurate with their income.

Click to expand...

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[The White Coat Investor]

CM wrote:

Coastalinvestor wrote:

This post is a testament to why relatively few physicians have a high net worth.

Click to expand…

Not sure why this opinion is common. This survey indicates that 65% of physicians between 50-64 yo are millionaires, and 73% are millionaires by 65 yo:

https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#5

Click to expand...

I think you're looking at those statistics in the wrong way. What you should have said was "despite 30 years of physician sized paychecks, 27% of doctors still don't even have a net worth of a million dollars."

[CM]

The White Coat Investor wrote:

CM wrote:

Coastalinvestor wrote:

This post is a testament to why relatively few physicians have a high net worth.

Click to expand…

Not sure why this opinion is common. This survey indicates that 65% of physicians between 50-64 yo are millionaires, and 73% are millionaires by 65 yo:

https://www.medscape.com/slideshow/compensation-2017-wealth-debt-report-6008663#5

Click to expand…

I think you’re looking at those statistics in the wrong way. What you should have said was “despite 30 years of physician sized paychecks, 27% of doctors still don’t even have a net worth of a million dollars.”

Click to expand...

Maybe my glass is half full.

27% is closer to "relatively few" than 73%.

I'm on the frugal end of the spectrum and can't relate to the usual level of spending for high-income professionals, but it seems that physicians haven't earned their profligate reputation. This forum selects for savers and investors, so the consensus judgment here may be harsher than elsewhere.

[Coastalinvestor]

Sorry I guess posts like these are just low-order compared to what I’ve been reading on other finance websites and books.  Posts should be devoted to arming physicians with knowledge that increases their net worth & financial literacy.  Trust me, I love cars as well I guess I just don’t see the point of discussing it here.

[I Find This Humerus]

Why do you say that?